*** Will he stay, or will he go...?

*** Prevent insurance issues with these 8 tips…

*** Go fishing and still make money… and more…

Dear Investment Academy reader,

Questions, questions, questions... over the past few days, that's all we've really had. With the political situation in the country poised to unravel at a rate of knots, the uncertainty's caused the market to bounce about, only to regain stability again. We'll have to wait until the JSE opens on Thursday to see how the impact of global market sentiment affects our market.

All we know for certain is that the rand's been zig-zagging all over the place as the news of Trevor Manuel's indecision has hit the streets. Will he stay? Or will he go? Only time will tell. What's certain is that, to date, 10 ministers and three deputys have resigned in the wake of Thabo Mbeki leaving his presidential seat.

And now onto chaos of another kind.. How often do you check your house and contents insurance? Is it up to date? Will you be adequately covered if things go wrong? With the inflation and high interest rates taking their toll, you need to ensure you're protected should something go wrong. I'll be sharing eight essential tips to help you do just that.

Alex Green, chairman of Investment U in the US, is with us. Today, he's telling us some more about the Gone Fishin' Portfolio we discussed on Tuesday. Plus, you'll learn which six factors determine the long-term value of the investment portfolio.

Over to Karin in Johannesburg...

Are you covered? The insurance checklist that could save you R40,000 or more…

You’re on the couch, watching the evening news. They cross over to the financial desk. You cringe. Palm’s sweating, your throat tightens. But, surprisingly, nothing’s wrong. Trevor Manual hasn’t retired nor has the stock markets spiralled down at lightning speed!

In fact, markets are looking good. Your shares are rocketing. And, the rand's going from strength to strength…

The phone rings – waking you up from this pleasant dream. It’s 3am. And you know the news can’t be good. You answer hesitantly. The voice on the other side on the line tells you your kitchen pipes have burst. There’s water streaming down the walls. Your pots are floating in your dining room and your R10,000 Persian carpet's now a soggy mess. The biggest problem, you're 4,500 miles from home!

Your mind races… How much damage has been caused? Will you have to replace everything? You think back, last month you read an article about John Black who lost over R40,000 worth of furniture when this happened to him. And the worst thing is, he was insured.

You panic!

Surely your household and contents insurance will cover this?

But what if it doesn’t?

Household and contents insurance is a must have for all homeowners. If you’re renting out a property, as the landlord, it’s a good idea to make sure you have this in place for your tenants. If you’re renting, ask your landlord what his/her insurance covers. If he/she doesn’t have one, you might be able to use this to your advantage and lower your rental fees.

The first thing you need to know is what these two types of insurance cover. Household Insurance covers the actual “bricks and mortar” against damages, while Household Contents Insurance covers you for damages to and the loss, or theft, of your personal possessions.

But, most of us aren’t insured for the true value of our possessions. When you finally claim, 10 to one you’ll probably find that you haven’t updated your policy in the last eight years. Here's how to avoid falling into rut that'll end up costing you big money.

The 8-point checklist for insuring your goods

* Make an inventory of all your contents, including serial and model numbers. Remember to keep the value current. If you don’t, you’ll end up being paid the value you insured it for eight years ago and NOT the replacement price of the item in today’s standards.

* Take photos or a “video” tour of your valuables. This way, the insurance company can’t dispute the existence of these items when it comes to replacing them.

* Another great tip is to scan your receipts and pictures into your computer's hardware and keep a copy of these records at the office. This way, should your possessions be destroyed by fire, flooding or your computer's stolen, you’ll be able to prove the value of the items and that you actually owned them.

* Valuable items, like jewellery, collectibles and art, are called “variable worth” items. This means that the overall worth of the item changes and you’ll need to update these things more regularly. Jewellery prices, for example, fluctuate with the price of precious metals and inflation rate, so make sure you update these at least every two to three years.

* If your policy requires that you have an alarm system or a smoke detector, ensure it's in working order. And don't forget to check the battery and test these systems regularly.

* If your insurance cover's subject to burglar proofing and security gates, this means that each and every window and door needs this. Else, you’re coverage can be deemed null and void and you’ll battle to get a fair settlement.

* Check the extent of your coverage. Some insurances (especially the cheaper ones) don’t include all types of coverage (flood, fire, theft, etc.) into their basic policies. Instead, they consider some types as “optional extras”. So make sure you know what types of damages you’re covered for and what you’re not.

* And finally, don’t forget to add new items to your insurance when you buy them and remove those you no longer have. This way, you’re not overpaying your insurer and are ensuring that you’ll be able to replace your new items should something happen to them.

Hopefully, you’ll never have to deal with these situations. But, by following these eight tips you’ll ensure you’re not taken for a ride if you actually have to deal with these issues.

Happy investing,

Karin Iten
for the Investment Academy

Over to Alex in the US...

Get wise, get wealthy... and get on with your life

When I speak at investment conferences around America, I often tell investors not to watch MSNBC, CNBC or the other financial networks.

Members of the audience sometimes find this comical - or even hypocritical - since I'm on these networks occasionally myself.

But if you watch these channels regularly, I promise it'll make you dumber and poorer.

Why? The underlying premise of these networks is that there's constant breaking news that you need to react to immediately.

Oil prices are up. What should you be buying? The Fed's cut rates a quarter point. How should you respond? Warren Buffett says the recession will last longer than expected. What should you be selling?

The financial media parades one so-called "expert" after another in front of you. Each offers different opinions on the economy and the markets. Is that because you'll profit by reacting to every government statistic, earnings release or economic forecast?

Of course not. The circus of activity is there to attract viewers. That keeps advertisers happy and the networks' bottom line growing.

But as a viewer and investor, it costs you money.

The 6 parts to unlocking long-term value

Wall Street and the financial press spew out so much analysis and so many opinions each week, most investors lose sight of the big picture.

And that's unfortunate. Because, in essence, there are only six factors that determine the long-term value of your investment portfolio:

1. How much you save.

2. How long your investments compound.

3. Your asset allocation. (How you divide your portfolio between stocks, bonds and other investments.)

4. Those assets' annual return.

5. How much you pay in annual expenses.

6. How much you pay in taxes.

That's it. Whether you're investing $10,000 or $10 million, these six factors will determine your eventual net worth.

Of all these factors, the only one you can't control is #4. You can't know with any certainty what stocks or bonds will return from one year to the next.

More sophisticated investors often say, "Well, of course no one knows for certain, but you have to guess."

No, you don't. And you shouldn't.

How to capitalise from the uncertainty...

Rather than guessing or pretending, you have answer these two unanswerable questions - like what the stock market will do this year or where interest rates are going - you can use an investment system that allows you to capitalise on the uncertainty inherent in the markets.

For example, five years ago I created The Gone Fishin' Portfolio. The portfolio's breathtakingly simple. All we do is divide our money among different asset classes - like shares, bonds, precious metals and real estate investment trusts - and then rebalance once a year to bring each class back to our original percentage.

It works like a charm. The portfolio's beaten the S&P 500 every year, while taking much less risk than being fully invested in stocks.

We also back-tested the system through the bear market of 2000-2002. Again, it beat the market every single year.

That's what you want, an investment portfolio that holds up well when the markets are down - and sprints ahead when the market is moving higher.

Since its inception, The Gone Fishin' Portfolio has compounded at 17.3% a year. And this is an extremely risk-averse approach, making it the perfect home for what I call your "serious money."

There are eight primary advantages to using The Gone Fishin' Portfolio:

1. It prevents you from being too conservative or too aggressive, so your investments neither tread water nor blow up because of crazy risk-taking.

2. It eliminates shortfall risk, the risk that inflation will destroy your purchasing power over the long haul. (It keeps your investment portfolio from kicking the bucket before you do.)

3. It requires no economic forecasting or market timing.

4. It eliminates individual security risk. (There's no chance of holding a WorldCom, Enron or any individual stock or bond that causes your investment portfolio to crater.)

5. It's exceptionally cost effective. You'll do a complete end run around Wall Street, paying nothing in brokerage commissions, planning fees or sales loads.

6. It's highly tax efficient, allowing you to defer capital gains taxes each year. (That keeps your net returns higher.)

7. It's based on the only investment strategy ever to win the Nobel Prize in Economics.

8. And, finally, it is so simple to implement, you can do it yourself in less than 20 minutes a year. (The rest of the time you're encouraged to travel, play golf, or "go fishin'.")

How does one investment system do all these things?

I don't have the space to tell you in this column. But I wrote a book that explains exactly how it's done.

It's called The Gone Fishin' Portfolio - and the subtitle says it all: Get Wise, Get Wealthy... and Get On With Your Life.

This book's the distillation of the best things I've learned in 23 years as a research analyst, portfolio manager and investment advisor. (As I sometimes tell my readers, I've made the dumb mistakes so you don't have to.) I can save you a lot of time - and a boatload of money - by showing you how to profit from my hard-earned experience.

However, I still haven't told you the best reason to use The Gone Fishin' Portfolio. The high returns and low risk are only the beginning.

You see, money isn't your most precious resource. It's time. Your time is limited, perishable, irreplaceable and unlike money, can't be saved.

The real beauty of The Gone Fishin' Portfolio is it allows you to redirect your time to high-value activities, whether it's work you enjoy, time spent pursuing your favourite activities, or just relaxing with your friends and family.

The Gone Fishin' Portfolio gives you an excellent opportunity to grow your wealth. Nothing offers better odds of long-term success.

But, more importantly, it guarantees you peace of mind and the time to devote to the people and pastimes you love.

Perhaps that's what recommends it most.

Good Investing,
Alex

PS: If you're interested in buying a copy of this book, it's available on Amazon.com for a 15% discount.